10. WrightMedical Technology
David D. Stevens, Interim CEO
Lance A. Berry, Sr. VP and Chief Financial Officer
Ann V. Burgess, VP, Biologics & Extremities
Michael E. Carroll, VP, Implant Technology & OrthoRecon
Rhonda L. Fellows, Sr. VP, Government Affairs, National Accounts & Reimbursement
William J. Flannery, VP, Logistics and Materials
William L. Griffin, Sr. VP, Global Operations
Kyle M. Joines, VP, Manufacturing
Max K. Mortensen, VP, Quality, Clinical and Regulatory Affairs
Lisa L. Michels, J.D., VP and Chief Compliance Officer
NO. OF EMPLOYEES: 1,400
GLOBAL HEADQUARTERS: Arlington, Tenn.
Diamonds—the traditional gift given to celebrate a 60th anniversary. They might be a girl’s best friend, but they don’t have too many end-uses in orthopedics. With or without diamonds, fiscal 2010 still shined for Wright Medical Technology Inc., which marked six decades in the orthopedics for the company. In 1950, the company’s first product was a rubber walking heel for leg casts invented by the company’s founder Frank O. Wright. What a difference 60 years make. Today, the company, which is located just outside Memphis in Arlington, Tenn., is a leader in the foot and ankle market, continues to add to its biologics offerings and grow its core hip and knee businesses.
Net sales for the fiscal year (ended Dec. 31) were approximately $519 million, up 6 percent from $488 million in 2009. Reported net income was $17.8 million, up from $12.1 million. Wright’s management pointed to its extremity product line as part of the reason for year’s gains. Sales for the sector grew 16 percent to $124.5 million. Domestically, the company’s U.S. extremity business experienced year-over-year growth of 14 percent, primarily due to the continued success of its Inbone total ankle system, increased sales of the Ortholoc polyaxial trauma plating system (launched in late 2009) and increased sales of the Valor ankle fusion nail system, launched in June 2010. Sales of hip products grew 5.3 percent to $176.7 million, driven by increased international sales of the Profemur hip system, primarily within Japan and Europe. Knee products increased sales by 5.5 percent to $128.8 million. Revenue from biologics products stayed relatively flat at $79.2 million up from $79.1 million. Though the company experienced increased sales of its Pro-Stim osteoinductive bone graft substitute, which had a limited launch in late 2009 and a full commercial launch in October 2010, revenue was offset by continued declines of the Graftjacker tissue repair and containment membranes and Allomatrix line of injectable tissue-based bone graft substitutes.
Wright also found sales growth in international markets. Though 60 percent of the company’s revenues were generated in the United States, sales outside the country increased by 11 percent to $209 million during 2010, driven by continued growth in Asian markets and the majority of the company’s European markets, as well as increased presence in Australia, the company reported.
New product rollouts were constant throughout the year.
In June, the company implemented the full commercial release of its Valor hind-foot fusion nail system, which Wright dubbed the “most comprehensive and advanced” surgical product for fusion of the ankle joint. The system was designed in conjunction with ankle surgeons to facilitate ankle fusion in the treatment of skeletal deformity, late-stage arthritis, or complications resulting from diabetes. Since its initial pre-market availability in November 2009, the system has been limited to use in a few centers in the United States gathering early clinical results. Valor comes in different sizes and anatomical screw positions to provide optimal fixation for each patient’s unique anatomy and condition. Each fusion nail also incorporates an internal compression device that allows the surgeon to control the compression between bone surfaces, optimizing the conditions for fusion.
The company also released the XPansion micro-grafting system for split-thickness skin grafting via a minimized donor site. The system uses single-use disposable instrument kit for harvesting, expanding, and applying split-thickness skin micro-autografts for the treatment of chronic and acute wounds. The instruments were invented by Elof Eriksson, M.D., Ph.D., chief of plastic surgery at Brigham & Women’s Hospital in Boston, Mass., and professor at Harvard Medical School. The current standard of care for skin grafting procedures usually is performed in the operating room under general anesthesia.
Conventional techniques use a powered cutting blade or “dermatome,” which can result in a large, painful donor site. The XPansion system provides the effectiveness of conventional auto-grafting techniques, according to the company, but in an outpatient setting. The unique ability to “micro-morselize” a very small skin graft with the this system delivers wound site coverage of up to 100 times the size of the donor site graft, compared with only 9-10 times the size of the donor graft with the conventional dermatome techniques. The benefit is exponentially greater wound coverage with reduced patient morbidity, delivered at a lower-cost facility setting, officials noted.
In July, Wright rolled out the Evolution medial-pivot knee system, its next-generation in medial-pivot knees, featuring enhanced instrumentation, more sizing options and a posterior stabilized option. The new knee builds upon twelve years of clinical experience with the Advance medial-pivot knee. Wright’s medial-pivot technology is designed to replicate the stability and function of the natural knee. “The unique feature of both the medial-pivot knees is the ball-in-socket mechanism on the medial side,” said David Blaha, M.D., orthopedic surgeon based in Ann Arbor, Mich. “The ball-in-socket mechanism is designed to mimic the anatomy of the normal knee to promote more natural stability and motion.” It also was designed to ease rehabilitation and address stability concerns that may be experienced by some total knee replacement recipients. Often, total knee replacement patients complain that their replaced knee does not feel normal, citing noises or a sensation of the joint slipping, especially as they descend stairs.
On the biologics side of its business, Wright introduced the Pro-Stim injectable inductive bone graft, a composite grafting material that is injected through a small needle or digitally implanted, hardens, and is replaced by the patient’s new bone over time. Pro-Stim provides surgeons with the osteoconductive base material—a patented combination of calcium sulfate and calcium phosphate materials—but adds a high volume of osteoinductive demineralized bone matrix to the formulation to speed the healing and remodeling process, according to the company. The system originally received U.S. Food and Drug Administration (FDA) clearance in September 2009, but it was released in a controlled fashion to select institutions to confirm human effectiveness during a 13-month period. In Wright’s pre-clinical testing, Pro-Stim outperformed autograft bone, considered the grafting gold standard, at eight weeks.
“Our pre-clinical model showed accelerated healing compared to autograft, suggesting a superiority to autograft that could be very beneficial for human use in the restoration of skeletal or bone defects,” said Thomas Turner, D.V.M., assistant professor at Rush University Medical Center in Chicago, Ill., and principle investigator for the pre-clinical model. “In fact, the new bone repair noted in the ProStim-treated defects was equivalent, if not better than, normal un-operated bone, indicating fast, efficient remodeling to a more normal state.”
At the end of the fiscal year, Wright Medical began the limited release of the Pro-Toe VO hammertoe fixation system. “Hammertoes are a significant problem for individuals around the globe,” said Bob Fencl, director of foot and ankle marketing for Wright. “In the U.S. alone, it is estimated that 10 to 20 percent of the population suffers from hammertoes with more than 500,000 patients requiring surgical treatment each year.” The full rollout occurred during the first half of this year.
In the area of research and development, Wright Medical was awarded a $2.4 million grant from the U.S. Department of Defense to fund a clinical study of Osteoset T bone graft substitute pellets in combat-related open fracture wounds. Osteoset T is a surgical-grade calcium sulfate bone graft substitute impregnated with 4 percent tobramycin sulfate. It is available in pellet form and is physically equivalent to Osteoset bone graft substitute, which does not contain tobramycin and was cleared by the FDA in 1996. Osteoset T bone graft substitute, which is not approved for use in the United States, is designed to release tobramycin at a predictable rate and act as a resorbable scaffold for new bone.
“Blast injuries suffered during combat can result in severe, open fracture wounds needing acute care.
Infection of bone and surrounding tissue pose great threats to the limb salvage and overall health of our wounded soldiers,” said Scott B. Shawen, M.D., director of orthopedic foot and ankle surgery at Walter Reed Army Medical Center in Washington, D.C., and principal investigator of the study. “Given the propensity for infection and potential subsequent amputation in many traumatic military injuries, current practices need to be improved upon with novel treatments and techniques.” Following FDA and Institutional Review Board approval, the investigational device exemption clinical study enrolled members of the U.S. military who have suffered combat-related open fractures. A successful study would pave the way for Wright Medical to submit a pre-market application for Osteoset T bone graft substitute in the United States.
2010 also brought resolution—for a time at least—to some legal issues plaguing Wright Medical since 2007. In September, the company entered into a deferred prosecution agreement with the United States Attorney’s Office for the District of New Jersey and a civil settlement agreement with the United States. These agreements were part of the government’s investigation into the Wright’s consulting arrangements (illegal kickbacks) with surgeons relating to its hip and knee products in the United States. Under the agreement, the government agreed not to prosecute the company in connection with the matter if Wright satisfied its obligations during a 12-month term. As part of the agreement, the company paid $7.9 million, without any admission of guilt. The company also entered into a five-year corporate integrity agreement with the Office of the Inspector General of the U.S. Department of Health and Human Services. An independent monitor was appointed to review and evaluate the company’s compliance with the arrangement.
Fast forward to this Spring and the picture is a little less “resolved.” In April, Gary Henley abruptly resigned as CEO, a post he’d held since 2006. The board accepted Henley’s resignation, but deemed it to be without “good reason” under the terms of his employment agreement, making him ineligible for severance. He was followed out the door by Frank Bono, the company’s chief technology officer and senior vice president. Bono was fired for “failing to exhibit appropriate regard for Wright’s ongoing compliance program.” Board Chairman David D. Stevens was appointed as interim president and CEO, while retaining his role on the board.
A month later, three more Wright executives cleaned out their desks. Raymond C. Kolls, senior vice president, general counsel and secretary was replaced by Thomas L. McAllister, who was appointed interim general counsel and secretary. Alicia M. Napoli, vice president, Clinical & Regulatory Affairs, resigned and was replaced by Max K. Mortensen. Aurelio Sahagun now serves as vice president, commercial operations for Europe, the Middle East and Africa, succeeding Cary P. Hagan. Like Henley, all three executives resigned without good reason, according to the company, adding that the management changes were unrelated to its operational performance, financial condition or financial reporting.
A day later, the company said the federal prosecutor for New Jersey accused it of “knowingly and willfully” breaking its deferred prosecution deal. As a result, Wright officials said the company could face “significant liability” including potential criminal and civil litigation. It also faces possible exclusion from federal healthcare programs such as Medicare, “which would have a material adverse effect on our financial condition.”
Additional details on the company’s status with the government were slated to be discussed during an earnings conference call scheduled just after press time. In July, the company adopted a new code of business conduct. The code provides a new description of prohibited activities with healthcare professionals, covers prohibited off-label promotion of the company’s products and enhances the company’s policies on confidential patient information, among other things.